1. THE CONTENT AND OPERATION OF
CONTRACTS
1.1 Introduction:
Factors Influencing the Content and Operation of a
Contract:
Key Questions to Consider:
1. Number of Parties involved in the Contract:
• Who Must Perform to Whom?
◦ Two Parties: The debtor must perform to the creditor.
◦ Multiple Parties: The situation becomes more complex with multiple debtors,
creditors, or when third parties are affected by the contract.
2. Differences in the Nature of Obligations and Terms
• What Must Be Performed?
◦ Contractual Obligations (1.3): These are the duties and responsibilities agreed upon
by the parties.
◦ Terms (1.4): Specific provisions that outline the obligations, rights, and duties of the
parties.
◦ Proof & Interpretation of Terms and Obligations (1.5): The process of determining
and understanding the meaning and scope of the terms and obligations.
◦ The content of a contract is more than just the expressly agreed-upon terms; some
terms are implied based on the circumstances or the unexpressed intentions of the
parties.
◦ Certain terms, such as conditions and time clauses, may limit the performance of an
obligation.
◦ Terms require interpretation to determine their true meaning.
3. Other Influencing Factors
• Extent of Party Autonomy in Determining Contract Content
◦ The content of a contract is primarily determined by the intentions of the parties.
◦ However, courts may intervene by reading terms into a contract that the parties did
not explicitly consider or by attributing meanings to terms that were not initially
intended.
• Impact of Values Such as Reasonableness, Fairness, and Good Faith
◦ South African courts do not recognize good faith as an independent standard for
measuring the validity of a contractual term.
◦ Good faith is considered a foundational value that influences the development and
adjustment of contract law.
Examples include the role of good faith in:
, ▪ Reading terms into a contract.
▪ Recognizing forms of breach of contract.
▪ Affording remedies for breach of contract.
1.2 The Parties to the Contract
General Principles
• A contract requires at least two parties (Natural Persons or Juristic Persons), typically
referred to as the Debtor (Dr) and Creditor (Cr).
• What Happens if More Parties Are Involved?
◦ Complications can arise when multiple parties are involved in contractual obligations.
◦ Example: A leases property to B & C.
• Basic Structure of a Contractual Obligation:
◦ The relationship between parties in a contract involves a debtor (the one who must
perform) and a creditor (the one entitled to performance).
◦ Example: In a typical sale agreement:
▪ The Debtor (seller) is obliged to deliver the goods.
▪ The Creditor (buyer) is entitled to receive the goods.
▪ However, both parties can be both creditor and debtor depending on the
obligation: the seller must deliver the goods (debtor) and is entitled to payment
(creditor), while the buyer must pay the price (debtor) and is entitled to receive the
goods (creditor).
Bilateral Juristic Act
• A contract is a bilateral juristic act, involving at least two parties.
◦ Debtor: The party obliged to perform, also known as the passive side of the
obligation.
◦ Creditor: The party entitled to performance, also known as the active side of the
obligation.
◦ The creditor has the right to claim performance, which places them on the active side
of the obligation.
Obligations Created by a Contract
• A contract will create at least one obligation, though more often it creates multiple
obligations.
◦ A party may be a creditor in one obligation but a debtor in another.
◦ A party can breach the contract either in their capacity as a debtor or as a creditor,
leading to different types of breach.
• Example: Contract of Sale
◦ Obligation 1: Delivery of the Goods (Merx)
▪ Creditor: Buyer (entitled to the merx)
▪ Debtor: Seller (obligated to deliver the merx)
◦ Obligation 2: Payment of the Purchase Price
▪ Creditor: Seller (entitled to the purchase price)
2
, ▪ Debtor: Buyer (obligated to pay the purchase price)
1.2.1 Multiplicity of Parties
• Multiple Debtors and/or Multiple Creditors
◦ Example: A1, A2, and A3 sell a business to B.
◦ Typically, contracts involve two parties, but it’s common for more than two parties to
be involved.
◦ When multiple parties are involved, the provisions of the contract must be carefully
examined to determine each party’s liability and entitlement.
• Impact on Third Parties
◦ Example: Estate Agents
▪ Estate agents facilitate transactions between buyers and sellers but are not actual
parties to the sale agreement. They are third parties affected by the contract but
not parties to it.
• Drafting Issues with Parties
◦ Example: Trusts
▪ Trusts are not juristic persons (JPs), so when a trust is a party to a contract, the
trustees must be cited, not just the name of the trust.
Types of Joint Relationships
(a) Simple Joint Relationship
• Nature of the Relationship:
◦ The parties agree on one performance, but there are actually separate obligations.
This is not a true joint relationship.
◦ Example: A bank loans R3 million to debtors B1, B2, and B3.
▪ The loan involves three debtors, and the performance (repayment) is divisible.
Each debtor is liable to repay R1 million.
▪ The contract creates separate obligations for each debtor, though the parties can
agree on a different division of the debt.
• Consequences of a Simple Joint Relationship:
◦ Waiver by Creditor: If one creditor is released, it does not affect the liability of the
others.
◦ Right of Recourse: If one party pays the full amount, they may seek reimbursement
from the other debtors through the law of unjustified enrichment.
(b) True Co-Debtorship
(i) Common/Collective Joint Relationship (Entitlement)
• Nature of the Relationship:
◦ There is only one obligation, and the debtors must perform jointly, while the creditors
must claim jointly.
◦ Example: A & B co-own a property and sell it to C.
▪ The performance (transfer of the property) is not divisible, so A and B must act
together to fulfill the obligation.
3
, • Practical Consequences:
◦ If one party refuses to perform, the other party must enforce the obligation through
legal means. Both parties must cooperate for the performance to be meaningful.
(ii) Joint and Several Liability (Solidary Relationship)
• Nature of the Relationship:
◦ The creditor can choose to claim the entire performance from one of the co-debtors
or divide the performance among the co-debtors.
• Creditor’s Options:
◦ The creditor may claim full or partial performance from any co-debtor (joint and
several liability) or from any co-creditor (joint and several entitlement).
• Origin:
◦ This type of liability can arise as a matter of law (e.g., partnerships) or from the
intention of the parties in the contract.
◦ There is no presumption of joint and several liability; it must be clearly stated in the
contract or arise from legal provisions.
• Consequences of Joint and Several Liability:
◦ Payment: The effect of payment on the liability of other co-debtors can vary
depending on the construction of the contract.
◦ Waiver: If a creditor releases one debtor, it may either proportionally reduce the
liability of others or leave them fully liable for the entire amount.
◦ Prescription: The effect of prescription (the lapse of time within which a claim must
be enforced) can differ based on the structure of the joint relationship.
• Right of Recourse:
◦ If one party ends up paying the full amount, they may have a right of recourse against
the other co-debtors, depending on the contract or under the law of unjustified
enrichment.
(iii) Liability as Surety and Co-Principal Debtor (S&CPD)
• Nature of the Relationship:
◦ The surety is jointly and severally liable for the debt as if they are the principal debtor,
but also liable as a surety.
◦ Consequences:
▪ The surety has no right of excussion (cannot demand the creditor first exhaust
remedies against the principal debtor).
▪ The surety has no right of division (cannot demand the liability be divided among
multiple sureties).
• Right of Recourse:
◦ If the surety and co-principal debtor pay the creditor, they may have a right of
recourse, which can be established by contract or under the law of unjustified
enrichment.
Bellingan Case Analysis
• Context:
◦ A widow obtained a cession of a claim and sought to target another partner for a
proportion of the remaining debt.
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CONTRACTS
1.1 Introduction:
Factors Influencing the Content and Operation of a
Contract:
Key Questions to Consider:
1. Number of Parties involved in the Contract:
• Who Must Perform to Whom?
◦ Two Parties: The debtor must perform to the creditor.
◦ Multiple Parties: The situation becomes more complex with multiple debtors,
creditors, or when third parties are affected by the contract.
2. Differences in the Nature of Obligations and Terms
• What Must Be Performed?
◦ Contractual Obligations (1.3): These are the duties and responsibilities agreed upon
by the parties.
◦ Terms (1.4): Specific provisions that outline the obligations, rights, and duties of the
parties.
◦ Proof & Interpretation of Terms and Obligations (1.5): The process of determining
and understanding the meaning and scope of the terms and obligations.
◦ The content of a contract is more than just the expressly agreed-upon terms; some
terms are implied based on the circumstances or the unexpressed intentions of the
parties.
◦ Certain terms, such as conditions and time clauses, may limit the performance of an
obligation.
◦ Terms require interpretation to determine their true meaning.
3. Other Influencing Factors
• Extent of Party Autonomy in Determining Contract Content
◦ The content of a contract is primarily determined by the intentions of the parties.
◦ However, courts may intervene by reading terms into a contract that the parties did
not explicitly consider or by attributing meanings to terms that were not initially
intended.
• Impact of Values Such as Reasonableness, Fairness, and Good Faith
◦ South African courts do not recognize good faith as an independent standard for
measuring the validity of a contractual term.
◦ Good faith is considered a foundational value that influences the development and
adjustment of contract law.
Examples include the role of good faith in:
, ▪ Reading terms into a contract.
▪ Recognizing forms of breach of contract.
▪ Affording remedies for breach of contract.
1.2 The Parties to the Contract
General Principles
• A contract requires at least two parties (Natural Persons or Juristic Persons), typically
referred to as the Debtor (Dr) and Creditor (Cr).
• What Happens if More Parties Are Involved?
◦ Complications can arise when multiple parties are involved in contractual obligations.
◦ Example: A leases property to B & C.
• Basic Structure of a Contractual Obligation:
◦ The relationship between parties in a contract involves a debtor (the one who must
perform) and a creditor (the one entitled to performance).
◦ Example: In a typical sale agreement:
▪ The Debtor (seller) is obliged to deliver the goods.
▪ The Creditor (buyer) is entitled to receive the goods.
▪ However, both parties can be both creditor and debtor depending on the
obligation: the seller must deliver the goods (debtor) and is entitled to payment
(creditor), while the buyer must pay the price (debtor) and is entitled to receive the
goods (creditor).
Bilateral Juristic Act
• A contract is a bilateral juristic act, involving at least two parties.
◦ Debtor: The party obliged to perform, also known as the passive side of the
obligation.
◦ Creditor: The party entitled to performance, also known as the active side of the
obligation.
◦ The creditor has the right to claim performance, which places them on the active side
of the obligation.
Obligations Created by a Contract
• A contract will create at least one obligation, though more often it creates multiple
obligations.
◦ A party may be a creditor in one obligation but a debtor in another.
◦ A party can breach the contract either in their capacity as a debtor or as a creditor,
leading to different types of breach.
• Example: Contract of Sale
◦ Obligation 1: Delivery of the Goods (Merx)
▪ Creditor: Buyer (entitled to the merx)
▪ Debtor: Seller (obligated to deliver the merx)
◦ Obligation 2: Payment of the Purchase Price
▪ Creditor: Seller (entitled to the purchase price)
2
, ▪ Debtor: Buyer (obligated to pay the purchase price)
1.2.1 Multiplicity of Parties
• Multiple Debtors and/or Multiple Creditors
◦ Example: A1, A2, and A3 sell a business to B.
◦ Typically, contracts involve two parties, but it’s common for more than two parties to
be involved.
◦ When multiple parties are involved, the provisions of the contract must be carefully
examined to determine each party’s liability and entitlement.
• Impact on Third Parties
◦ Example: Estate Agents
▪ Estate agents facilitate transactions between buyers and sellers but are not actual
parties to the sale agreement. They are third parties affected by the contract but
not parties to it.
• Drafting Issues with Parties
◦ Example: Trusts
▪ Trusts are not juristic persons (JPs), so when a trust is a party to a contract, the
trustees must be cited, not just the name of the trust.
Types of Joint Relationships
(a) Simple Joint Relationship
• Nature of the Relationship:
◦ The parties agree on one performance, but there are actually separate obligations.
This is not a true joint relationship.
◦ Example: A bank loans R3 million to debtors B1, B2, and B3.
▪ The loan involves three debtors, and the performance (repayment) is divisible.
Each debtor is liable to repay R1 million.
▪ The contract creates separate obligations for each debtor, though the parties can
agree on a different division of the debt.
• Consequences of a Simple Joint Relationship:
◦ Waiver by Creditor: If one creditor is released, it does not affect the liability of the
others.
◦ Right of Recourse: If one party pays the full amount, they may seek reimbursement
from the other debtors through the law of unjustified enrichment.
(b) True Co-Debtorship
(i) Common/Collective Joint Relationship (Entitlement)
• Nature of the Relationship:
◦ There is only one obligation, and the debtors must perform jointly, while the creditors
must claim jointly.
◦ Example: A & B co-own a property and sell it to C.
▪ The performance (transfer of the property) is not divisible, so A and B must act
together to fulfill the obligation.
3
, • Practical Consequences:
◦ If one party refuses to perform, the other party must enforce the obligation through
legal means. Both parties must cooperate for the performance to be meaningful.
(ii) Joint and Several Liability (Solidary Relationship)
• Nature of the Relationship:
◦ The creditor can choose to claim the entire performance from one of the co-debtors
or divide the performance among the co-debtors.
• Creditor’s Options:
◦ The creditor may claim full or partial performance from any co-debtor (joint and
several liability) or from any co-creditor (joint and several entitlement).
• Origin:
◦ This type of liability can arise as a matter of law (e.g., partnerships) or from the
intention of the parties in the contract.
◦ There is no presumption of joint and several liability; it must be clearly stated in the
contract or arise from legal provisions.
• Consequences of Joint and Several Liability:
◦ Payment: The effect of payment on the liability of other co-debtors can vary
depending on the construction of the contract.
◦ Waiver: If a creditor releases one debtor, it may either proportionally reduce the
liability of others or leave them fully liable for the entire amount.
◦ Prescription: The effect of prescription (the lapse of time within which a claim must
be enforced) can differ based on the structure of the joint relationship.
• Right of Recourse:
◦ If one party ends up paying the full amount, they may have a right of recourse against
the other co-debtors, depending on the contract or under the law of unjustified
enrichment.
(iii) Liability as Surety and Co-Principal Debtor (S&CPD)
• Nature of the Relationship:
◦ The surety is jointly and severally liable for the debt as if they are the principal debtor,
but also liable as a surety.
◦ Consequences:
▪ The surety has no right of excussion (cannot demand the creditor first exhaust
remedies against the principal debtor).
▪ The surety has no right of division (cannot demand the liability be divided among
multiple sureties).
• Right of Recourse:
◦ If the surety and co-principal debtor pay the creditor, they may have a right of
recourse, which can be established by contract or under the law of unjustified
enrichment.
Bellingan Case Analysis
• Context:
◦ A widow obtained a cession of a claim and sought to target another partner for a
proportion of the remaining debt.
4
